UNIT -1 PART 2 Flashcards
What is the role of the Reserve Bank of India (RBI)?
The RBI acts as the custodian of India’s economic and financial stability, regulating the banking system and controlling the money supply.
Who owns the Reserve Bank of India?
It is owned by the Union Ministry of Finance.
When was the Reserve Bank of India established?
The RBI was established on 1st April, 1935.
What major event led to the establishment of the RBI?
The economic turmoil after World War I.
What was the recommendation of the 1926 Royal Commission on Indian Currency and Finance?
It recommended setting up a Central Bank for India.
What significant change occurred to the RBI in 1949?
The RBI was nationalized.
What is the monopoly of the Reserve Bank of India regarding currency?
The RBI has the monopoly of issuing currency notes except for the ₹1 note and coins.
What system does the RBI use to issue currency notes?
Minimum Reserve System.
What are the major functions of the RBI?
- Issuer of Bank Notes
- Banker to the Government
- Bankers’ Bank
- Lender of Last Resort
- Custodian and Manager of Foreign Exchange Reserves
- Controller of Credit or Money Supply
What is the RBI’s objective related to price stability?
To protect the value of the currency and control inflation.
Where are currency notes printed in India?
In 4 presses: Nasik, Dewas, Mysore, and Salboni.
What is the significance of the ₹1 note in India?
It bears the signature of the Finance Secretary of the Government of India, not the Governor of the RBI.
What reserves does the RBI maintain for the Minimum Reserve System?
Gold and Foreign Currency Reserves worth ₹200 crores.
What is the Bank Rate Policy?
It is the minimum rate at which the central bank will discount first class bills of exchange.
What does Open Market Operations refer to?
The sale and purchase of securities, bills, and bonds by the central bank to regulate money supply.
What is Cash Reserve Ratio (CRR)?
The minimum percentage of a bank’s total deposits required to be kept with the central bank.
What is Statutory Liquidity Ratio (SLR)?
A fixed percentage of a bank’s assets that must be maintained in the form of cash or liquid assets.
What are margin requirements in credit control?
The difference between the market value of a security and the loan amount provided against it.
What is rationing of credit?
Fixation of credit quotas for different business activities to prevent excessive credit flow.
What does regulation of consumer credit involve?
Laying down terms and conditions for the proper regulation of consumer credit by commercial banks.
What is moral suasion?
The method of informal suggestion and advice by the central bank to commercial banks.
What is direct action in the context of RBI?
Issuing directives to commercial banks to enforce specific policies.
